LinkedIn's strong growth isn't good enough

Investors are now more worried that the professional social network may be moving into a future with less robust expansion.

By Jonathan Berr May 6, 2013 9:54AM
Shares of LinkedIn (LNKD) were clobbered on Friday after the professional social network gave disappointing earnings guidance. "Disappointing," however, needs to be viewed in context. LinkedIn is still very profitable.
Revenue is expected to jump 50% in the current quarter, better than that of rival Facebook, where revenue is forecast to grow 36%. Investors, however, were worried that LinkedIn's growth rates are going to come in below those of previous quarters. However, a slowdown in growth, while unfortunate, is hardly a surprise because it happens to every company.

And LinkedIn is still growing. Its core recruiting business generated revenue of $184.3 million in the last quarter, an increase of 80%. Marketing solutions sales rose 56% to $74.8 million from a year ago, fueled by strong advertising sales. Premium subscriptions rose 73% to $65.6 million.

LinkedIn Corp. headquarters in Mountain View, Calif. on April 25, 2013 (© David Paul Morris/Bloomberg via Getty Images)The company reported 218 million members, an increase of about 8% from 202 million in the fourth quarter. People signed up for the service at a rate of greater than 2 per second. LinkedIn also reported solid gains across all geographies and generated more than 11 billion page views excluding mobile, an 18% year-over-year increase.  

However, competition is on the rise. Not only is Facebook (FB) a threat but so also is France-based Viadeo, which claims more than 50 million members, mostly outside the U.S. Some analysts want LinkedIn to perform better in the mobile area.

The stock also isn't cheap.

Reuters pegs LinkedIn's price-to-earnings ratio at an eye-popping 1,050, a valuation that makes it difficult to recommend. At least, that's the case for now.

Though LinkedIn’s days of hypergrowth may be over, the company won't fade away anytime soon. It will be good investment at the right price. However, that may take a while to happen.

Jonathan Berr does not own shares of the listed stocks. Follow him on Twitter @jdberr.
 
Tags: FBLNKD
2Comments
May 6, 2013 3:31PM
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LinkedIn: another worthless non-product like Fakebook.
May 6, 2013 3:56PM
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I hate this stuff, I get 4 to 7 emails a day from this place and they all go direcly to the trash.  I opened the first couple and didn't really need to subscribe or buy the crap they were selling.  If I can block anything from Linkedin then I'd be a happy camber.
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